How buying in bulk can cost MORE money (and not save money)

Like a lot of folks, I’ve used buying in bulk to save a lot of money over these months. Thanks to club stores like Costco and Sam’s Club, Amazon.com’s grocery section, as well as many grocery stores carrying larger quantity versions, buying in bulk has become so ingrained in our collective consciousness that many of us view the act as synonymous with saving.

But there are a few ways it can backfire and cost more. Let’s walk through them.

Sometimes the bigger packages can literally cost more per item

This should be a no-brainer, right?

I see this with cereal a lot at the grocery store when single units go on sale. For an online example, search for “Kellogg’s Frosted Mini Wheats Cinnamon Roll Flavored Little Bites” at Amazon, and you’ll be given these two options:

miniwheats

My first thoughts upon seeing this might be to wonder whether I could keep 10 boxes in a New York apartment without annoying my roommates and whether I could finish 10 boxes in a reasonable amount of time.

But look again: the four-pack costs $5.42 per box while the 10-pack costs $5.82. In this case, I’d be paying more to have too much cereal.

It’s pretty embarrassing when this happens. That’s why I take the extra second to whip out the calculator at the grocery story to make sure I’m not paying more for the privilege of getting a ridiculous amount of something.

Sometimes, having more of something around makes me eat it faster

There’s a psychological principle that says that, on average and in isolation, our level of consumption of some good will be directly proportional to how much of that good we have.

But I don’t need science to know this is true. Think about how much more you eat at a buffet. Or how you’ll eat nearly all of a large plate of spaghetti even though you know a small plate would have satisfied you.

For example, if I were to save 5% by buying 40 pounds of bacon at one go, but having so much made me eat twice as much bacon, then I really wouldn’t save any money.

Also, I’d need to buy bigger pants.

Things go bad

Whenever I make my way to a big grocery stores, I always sigh upon arriving at the poultry section. Buy the 10-pound “family” pack or the 40-pound “industrial” box of chicken and the unit price is cut in half or better.

And don’t get me started on leafy greens; the marginal cost of fresh, packed spinach drops pretty darn close to zero as you upgrade among the bigger sizes.

Sigh.

But you can see the problem here: Yes, I could buy twice as much spinach as I could eat for only a few cents more, but if I have to throw away that extra amount when it spoils, then that few cents is just wasted.

(Relevant older post: Yes, I should get smart about freezing food and otherwise slowing spoilage, and I should better understand what printed “expiration dates” on food mean.)

Having money locked up in stuff means less money liquid to pay down debt or invest

This has to do with the time value of money and is a bit tougher to see so I’ll use an example.

  • Suppose I had $300 cash on hand and a weekly income of $3.
  • Suppose further that I bought this $300, 55-pound box of dry quinoa from Amazon.com. Dry quinoa basically lasts forever, but that much quinoa would take me two years to eat, which works out to a quinoa budget of about $2.87 per week over those two glorious, quinoa-filled years.
  • Suppose that the alternative is to buy $3 packs of quinoa once a week somewhere else.

$2.87 < $3, so I should feel pretty good about myself, right?

Not so fast.

  1. Recall that I have student loan debt at 7.9%
  2. Alternately, I could have just bought weekly $3 packs of quinoa, in addition to paying off $297 of student loan debt that first week. I would also incur less interest in the process.

How much less?

Click to enlarge

Click to enlarge

Looks like $21.69.

Sure, $21.69 may not be that much to you, but that’s seven more weeks of eating I’d be able to do. Also, I didn’t have to deal with a mountain of quinoa.

Conclusion

In conclusion!

When shopping in bulk, I make sure to compare unit costs, avoid eating more just because I have more, avoid buying so much that food spoils, and don’t buy more than I’ll consume in a reasonable amount of time.

Who’s got more tips on not losing money when buying in bulk?

Comments

  1. Kali @ Common Sense Millennial says

    Great post! It’s so easy to get sucked into thinking bulk is better 100% of the time, but you’re so right. You have to check the unit price! We do this all the time at the store when trying to decide what size of something to buy.

  2. says

    Great points and so true. I honestly get a little angry when I see that the unit price of the larger item is more than the smaller item. If I have to store that big package, it better be worthwhile. One of the few things I buy in bulk is paper supplies- toilet paper, paper towels, napkins, tissues- those will ALWAYS be a necessity.

  3. says

    have you tried Boxed? It’s an app that works like Costco but is free and has no membership fees annually. Prices are close to Costco and shipping is free. Some computer programmers with too much time on their hands created it and it seems to work well. I have a Costco membership so I have no use but I try to suggest it to non-Costco folks.

    As far as buying in bulk, I buy perishables that can be frozen, shelf stable perishables, and/or non-perishables in bulk and only if the per unit price does make it worth it. Like you, my husband and I are limited in storage in our apartment so we can’t go crazy with items. Plus, bulk produce from bulk stores is rarely good so I prefer that from farmer’s markets or my local food coop.

    Lastly, for items we don’t go through fast enough, I have a brother I try to share them with (like the six pack of toothpaste and the 4 pack of toilet bowl cleaner) who will split the cost with me too.

  4. says

    It’s always good to consider the bigger picture and not necessarily go with our first instinct :) Simple math skills can save consumers a lot of money. Instead of all the time spent on learning differential calculus and advanced trigonometry, schools should be allocating more resources towards teaching students practical uses of basic multiplication and division like comparing cost per unit size and how to calculate NPV :)

  5. Done by Forty says

    Mario,

    I love the take on the opportunity costs of having your money tied up in every day bulk purchases. Rarely do people consider this when spending hundreds at Costco and justifying it “because it won’t go to waste.” You’ve introduced a facet that few of us probably include in our analyses.

    Cheers, and thanks for the follow on Twitter. I’m glad, as now I know of your blog.

  6. Travis Pizel says

    The middle two are biggies for us….if it’s in the cabinets, I’m going to eat it. It doesn’t last longer, I just eat more. If it’s something my wife wanted that I don’t like….it typically just gets forgotten and half of it gets thrown out. When we buy in bulk, we have to have a plan for it, otherwise it will fall into one of these two categories.

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge